Health Care Costs and Financing

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State Children's Health Insurance Programs (SCHIPs) provide health insurance to indigent children who are not poor enough to qualify for Medicaid (family income 133 percent or less of the federal poverty level, FPL) with health insurance. These programs have sparked concerns that they would prompt families to disenroll from private insurance (so-called "crowd out"). Families currently eligible for SCHIPs have incomes of 134-200 percent of the FPL.

Based on the experience of the Massachusetts Children's Medical Security Plan (CMSP), which has modest premiums and is open to children regardless of income, SCHIP coverage could be expanded to children with incomes from 200 to 300 percent of the FPL without crowding out employer-sponsored insurance (ESI). That's the conclusion of a study supported in part by the Agency for Healthcare Research and Quality (HS10207) and led by Emily Feinberg, Sc.D., of the Massachusetts Department of Public Health.

Dr. Feinberg and her colleagues surveyed by telephone the parents/guardians of 996 children who were enrolled in CMSP as of April 1998, to detect differences in access to and uptake of ESI between Medicaid-eligible, SCHIP-eligible, and SCHIP-ineligible children (family income above 200 percent of the FPL). They found that children's access to ESI was limited (19 percent), and uptake was low (13 percent). Of the children surveyed who were recently covered by ESI (59 percent), 70 percent were no longer eligible, usually due to parental job change. Few children who had ESI at enrollment dropped this coverage to enroll in CMSP (1, 4, and 2 percent, respectively, of Medicaid-eligible, SCHIP-eligible, and SCHIP-ineligible children).

There were no significant differences in crowd out between SCHIP-eligible and SCHIP-ineligible
children. However, the applicability of study findings in other areas may be limited by the fact that the CMSP, unlike SCHIP programs, is not a comprehensive insurance program and does not cover hospitalizations. This difference may have made higher income families less willing to drop private coverage and enroll in CMSP.

More details are in "Family income and crowd out among children enrolled in Massachusetts Children's Medical Security Plan," by Dr. Feinberg, Katherine Swartz, Ph.D., Alan Zaslavsky, Ph.D., and others, in the December 2001 Health Services Research 36(6).